Impact of Stimulus Funds on Single Audit

By: Dennis Gardiner, Partner email

About half of the $770 billion of the economic stimulus funds will be received by governmental bodies and not-for-profit organizations as grant funds, requiring these entities to have single audits performed on the Federal programs. Along with these funds come unprecedented transparency and accountability requirements. The objective of these additional requirements is to let Americans know where their tax dollars are going and how they are spent. The new requirements will impact all levels of the grant process including federal agencies, recipients and sub-recipients, and independent auditors. Federal grantor agencies will provide technical assistance to the auditing profession. In addition, high-risk programs will be targeted for priority audits, inspections and investigations. Quality control reviews will ensure that single audits are properly performed, and that improper payments and other noncompliance are fully reported. Follow-up reviews of audit quality, with an emphasis on Recovery Act funds, will be available on www.recovery.gov, which serves as a public source of information on recovery funds. The normal reporting processes will be followed for all Federal funds when a single audit is required, however Recovery Act funds will be identified separately on each and every report and must be tracked separately from the initial receipt by the recipient. These are not new federal programs, they’re existing programs with new compliance requirements. Recipients are also required to separately identify Recovery Act funds to each subrecipient at the time of the subaward and each time the funds are disbursed. Grant recipients will be required to report certain information to the Federal awarding agency within 10 days after the end of each quarter: the total amount of Recovery Act funds received, the amount expended, the name and a description of each project for which funds were spent, the completion status, number of jobs created and retained, subcontracts and pass-through grants awarded by the recipients, and finally, the purpose, cost and rationale for infrastructure investments. Internal controls over compliance are always tested on a single audit, but with additional funding, officials are concerned that a recipient’s internal controls may not be able to cope. Normally, single audit findings are not reported until nine months after year end, so any control deficiencies won’t be corrected before increased funding is released. The unprecedented transparencies and accountability requirements come with a price tag for recipients and their independent auditors. With the increased audit considerations, we expect the amount of work we do on single audits, and accordingly, the cost of a single audit, to increase significantly. Federal funding may become the largest source of revenue for local governments, possibly more than property tax. For some grant recipients, Recovery Act funds will have to be audited as major programs for the fiscal year ending June 30, 2009. We anticipate even more for fiscal year 2010.